Main driving factors of the interest rate-stock market Granger causality

Jammazi, Rania; Ferrer, Román; Jareño, Francisco; Hammoudeh, Shawkat

doi:10.1016/j.irfa.2017.07.008

Cited by 46 publications

(30 citation statements)

References 54 publications

Supporting

Mentioning

Contrasting

Unclassified

Order By: Relevance

“…The returns of regional indices move in the same direction in response to changes in global economic activity, which is consistent with the findings of Aloui et al (2013). Through the discount factor effect, the intensification of global risks and an increase in discount rates on the corporate side may adversely affect stock prices (Jammazi et al 2017). In the increasing interest environment of shock periods, investors may be nudged to the bond market and may reduce the share of stocks in their portfolios.…”

Section: Extreme Events On Central and Eastern European Stock Marketssupporting

confidence: 81%

“…On the one hand, the key policy rate influences stock prices through the portfolio rebalancing effect. On the other hand, stock prices also affect interest rates; an expected decline in stock prices signal pessimism regarding the future performance of the real economy, to which the monetary authority is expected to react with an interest rate cut (Jammazi et al 2017). Besides inverse effects, effects may also be exerted in the same direction along the lines of the flight-to-quality strategy (Baele et al 2013).…”

Section: Comovement Under Extreme Positive Returnsmentioning

confidence: 99%

See 1 more Smart Citation

Capital Market Contagion in the Stock Markets of Visegrád Countries Based on the Heckman Selection Model

Csiki¹,

Kiss²

2018

Hitelintézeti szemle

View full text Add to dashboard Cite

In our study, we examine contagions materialising between the stock market indices of three countries in the Visegrád region-Poland, Czech Republic, Hungary-and selected developed countries-USA and Germany. The sample covers the period between 1997 and 2017, which includes a number of events that caused major financial and capital market turbulences in past decades, the effects of which are still significant on the capital markets of the Visegrád region today. We simulated the comovement of Visegrád and developed markets with a DCC procedure, and applied the Heckman selection model-a novel technique in relevant studies-to explain the volatility of the correlation and to capture collective behaviours between the markets. Our analysis of the extreme returns of regional indices reveals increasing global integration across the regional equity markets and their exposure to the oil market. The relevance of our work is confirmed by the presence of contagions-as presented within the framework of the model-between the regional indices and the S&P500 as well as the DAX index which are caused by financial and capital market shocks, while there is also evidence of a significant impact exerted by the German stock market index on the Visegrád stock indices. Periodically and as a function of market shifts, some variance can be observed in the contagion channels, and the unique properties specific to the region can be recognised.

show abstract

Section: Extreme Events On Central and Eastern European Stock Marketssupporting

confidence: 81%

Section: Comovement Under Extreme Positive Returnsmentioning

confidence: 99%

Capital Market Contagion in the Stock Markets of Visegrád Countries Based on the Heckman Selection Model

Csiki¹,

Kiss²

2018

Hitelintézeti szemle

View full text Add to dashboard Cite

show abstract

“…Gurgul and Lach (2010) focused on the Polish stock market from 1998 to 2008 and noted Granger-causality effects from interest rates to the respective stock market index. Jammazi et al (2017) reported a significant bidirectional causal relationship between stock prices and interest rates for the US markets between 1993 and 2014, and such links strengthened following the start of the US sub-prime mortgage crisis in mid-2007. During times of instability, investors replace stocks with high quality bonds resulting in a decrease in stock prices and lower bond yields, causing a positive correlation.…”

Section: Interest Ratesmentioning

confidence: 99%

Do stock markets lead or lag macroeconomic variables? Evidence from select European countries

Camilleri

Scicluna

Bai

2019

The North American Journal of Economics and Finance

View full text Add to dashboard Cite

This study examines the connections between stock prices and key macroeconomic indicators: inflation, industrial production, interest rates, money supply and select interactions between the latter group of variables. Such links are evaluated through vectorautoregressions (VARs) on monthly data spanning over the period 1999-2017, for Belgium, France, Germany, Netherlands and Portugal. We check whether such relations are confirmed across different sub-periods and also adopt a non-parametric approach by using a Pesaran-Timmermann test. We find different contemporaneous and lead-lag relationships between stock prices and the selected variables, although there are variations across countries. VAR models indicate that stock prices significantly lead inflation across all countries during the sample period and in most cases this relationship was positive. In addition, stock prices significantly lead industrial production in four of the sampled countries and these relationships were positive as well. Contrary to long-established finance theories, we did not find numerous significant links between interest rates and stock indices; however the interaction between interest rates and money supply was a leading indicator of stock prices in France, Germany and Portugal.

show abstract

“…Information spillover among assets is a highly researched topic in the field of financial risk management. Several methodological approaches have been applied to assess the spillover effects between asset classes and across countries, such as the Granger causality test (Hong et al, 2009;Geng et al, 2017;Jammazi et al, 2017), conditional value at risk (CoVaR) and delta conditional value at risk (ΔCoVaR) (Reboredo and Ugolini, 2015;Mensi et al, 2017;Liu et al, 2017) and the connectedness network Yilmaz, 2012, 2014). However, Granger causality can only provide a causal direction between variables but cannot provide further evidence on systemic risk.…”

Section: Methodsmentioning

confidence: 99%

Information spillover across international real estate investment trusts: Evidence from an entropy-based network analysis

Marfatia

Gupta

2018

The North American Journal of Economics and Finance

View full text Add to dashboard Cite

In this study, we unveil information spillover between international real estate markets using an entropy-based network approach for real estate investment trusts (REITs). Our novel approach is simple and yet flexible enough to accommodate the nature and extent of information spillover among several components of the global housing network. For a network of nine leading industrial economies, we unveil static and time-varying information spillover of REIT returns using total transfer entropy, pairwise net transfer entropy and directional ("From", "To") transfer entropy. Evidence suggests that the greatest pairwise transfer entropy is from the US to Australia, whereas France, the Netherlands, New Zealand and Singapore are the largest information recipients in the network. The time-varying evolution of total transfer entropy also exhibits a declining trend, supporting the decoupling hypothesis for the global housing market network. The extreme value analysis shows the changing role of US and UK housing markets.JEL Codes: R30, R33, G14.

show abstract

Main driving factors of the interest rate-stock market Granger causality

Cited by 46 publications

References 54 publications

Capital Market Contagion in the Stock Markets of Visegrád Countries Based on the Heckman Selection Model

Capital Market Contagion in the Stock Markets of Visegrád Countries Based on the Heckman Selection Model

Do stock markets lead or lag macroeconomic variables? Evidence from select European countries

Information spillover across international real estate investment trusts: Evidence from an entropy-based network analysis

Contact Info

Product

Resources

About